Bank of Ireland Investor Presentation. For year ended 31 March 2009

Transcription

1 Bank of Ireland Investor Presentation For year ended 31 March 2009

2 Forward-looking Statements This document contains certain forward-looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934 and Section 27A of the US Securities Act of 1933 with respect to certain of the Bank of Ireland Group s (the Group) plans and its current goals and expectations relating to its future financial condition and performance and the markets in which it operates. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements sometimes use words such as aim, anticipate, target, expect, estimate, intend, plan, goal, believe, or other words of similar meaning. Examples of forward-looking statements include among others, statements regarding the Group s future financial position, income growth, business strategy, projected costs, estimates of capital expenditures, and plans and objectives for future operations. Because such statements are inherently subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, risks and uncertainties relating to profitability targets, prevailing interest rates, the performance of the Irish and UK economies and the performance and volatility of the international capital markets, the expected level of credit defaults, the Group s ability to expand certain of its activities, development and implementation of the Group s strategy, including the ability to achieve estimated cost reductions, competition, the Group s ability to address information technology issues and the availability of funding sources. Any forward looking statements speak only as at the date they are made. The Group does not undertake to release publicly any revision to these forward-looking statements to reflect events, circumstances or unanticipated events occurring after the date hereof. The reader should however, consult any additional disclosures that the Group has made or may make in documents filed or submitted or may make in documents it has filed or submitted or may file or submit to the US Securities and Exchange Commission. 2

3 Contents 1. Bank of Ireland overview 2. Irish economy & Government finances 3. Liquidity, funding & capital strategy 4. Group loan book & asset quality 5. Conclusion 6. Appendices i. Group financial highlights March 2009 ii. Additional Group loan book analysis iii. Contacts Bank of Ireland is regulated by the Financial Regulator. In the UK, Bank of Ireland is authorised by the Irish Financial Regulator and authorised and subject to limited regulation by the Financial Services Authority. Details about the extent of our authorisation and regulation by the Financial Services Authority are available from us on request. Bank of Ireland incorporated in Ireland with limited liability. Registered in Ireland (No. C-1, Head Office, Lower Baggot Street, Dublin 2, Ireland), England & Wales (No. FC007248, 36 Queen St, London, EC4R 1BN) & Northern Ireland (No. FC000029, 1 Donegall Square South, Belfast, BT1 5LR) 3

4 Bank of Ireland Group overview A diversified financial services group established in 1783 Traditional relationship-driven retail and commercial bank with a conservative business philosophy Total assets: 184bn* Group priorities: Support our customers Strengthen our capital Continue to fund our balance sheet effectively Actively manage our credit risks Rigorously manage our cost Rating Agencies Long Term Outlook Short Term Government Guaranteed Deposits and Debt Securities Fitch A- Stable F1+ AA+/Negative/F1+ Moody s A1 Stable P-1 Aa1/Negative/P -1 Standard & Poor s A Watch Negative A-1 AA/Negative/A-1+ DBRS AA Review Negative R-1 (high) AA (high)/negative/r-1 (high) * Excludes Life funds held on behalf of policyholders: 31 March bn BoI credit ratings as at 07 July

5 Performance overview March 2009 Group Profitability Mar 09 vs Mar 08 Group Performance Mar 09 Mar 08 Underlying PBT 332m (81%) Impairment charge - loans and advances to customers 102bps 17bps (Loss) / profit before tax ( 7m) - Underlying EPS 30.2c (80%) EPS 5.9c - Capital Mar 09* Mar 08 Cost / income ratio 52% 51% Return on equity 5% 21% Dividend on ordinary stock c Balance Sheet Mar 09 Mar 08 RWAs ( bn) Core tier 1 9.5% 5.7% Tier 1 ratio 12.0% 8.1% Total capital ratio 15.2% 11.1% Wholesale funding / total assets** 40% 41% Loans / deposits 161% 157% Notes: * Post 3.5bn investment by Irish Government in Preference Shares (excluding this investment; Core tier 1 6.2%, tier 1 8.7% and total capital 11.9%); ** Total assets excluding BoI Life policyholder assets 5

6 Stabilisation immediate management priority Priority Progress Metric* Capital Funding Re-capitalisation Balance sheet deleverage Selective asset disposal Funding effectively in challenging markets Government investment of 3.5bn completed 31 March 2009 following extensive due diligence - including stress testing Withdrawn from intermediary-distributed UK mortgage business (Jan 09); winding down selected international portfolios Market conditions not currently conducive to asset disposals Distribution driving growth in franchise deposits Government Guarantee - a support to funding Continuing to build pool of contingent liquidity assets - 49bn Equity tier 1 6.2% Core tier 1 9.5% Total tier % Total capital 15.2% Deposits flat yoy** Loan / deposit ratio: 161% Term funding with maturity >1 year: 27% Asset quality Costs Rigorous management of asset quality Reduce absolute cost levels Downside scenario estimates of impairment charge a likely outcome Engaging constructively with Government on NAMA Estimated impairment charge of c. 6bn in 3 years to March 2011 of which 1.4bn in the year to 31 March 2009 Rigorous control of all costs Costs down 6% Staff numbers down 5% Variable pay significantly reduced Note: * as at or year to March 2009 as appropriate; ** constant currency 6

7 Series of supportive Irish Government initiatives Irish Government September guaranteed customer deposits, wholesale funding and certain other liabilities for 2 years - extension for certain issuance beyond September 2010 (April 2009) commitment to support systemically important banks Invested 3.5bn in 8% coupon preference shares with warrants strengthening our capital base following satisfactory due diligence and stress testing (March 2009) Providing framework to deal with property development, landbank and related assets through the National Asset Management Agency (NAMA) (April 2009) Bank of Ireland is actively and positively engaged with the Government in this process 7

8 Contents 1. Bank of Ireland overview 2. Irish economy & Government finances 3. Liquidity, funding & capital strategy 4. Group loan book & asset quality 5. Conclusion 6. Appendices i. Group financial highlights March 2009 ii. Additional Group loan book analysis iii. Contacts 8

9 Irish economy contracting In 2008, Irish GDP contracted by 2.3% reflecting a series of economic shocks Irish GDP set to contract further. Domestic demand has fallen sharply over the past year and this trend will continue in the short term Irish exports continue to perform well; over half of merchandise exports are chemicals, pharma and medical devices, which should continue to be more resilient to external influences Lower ECB interest rates and negative inflation should help to relieve some pressure on household incomes 9

10 Correction in Irish housing market House building peaked in 2006 at a record 88,400 new homes. House completions have fallen rapidly since then; to 52,000 in 2008 and are forecast to fall to c.30,000 in 2009 Housing construction accounted for c.5% of GDP in 1997, rising to a peak of over 11% in 2005 and may average c.3.5% in 2009 House prices expected to fall by a further 10% in 2009, while an increase in supply of rental property has put downward pressure on rents The housing market may pick up in 2010, amid lower interest rates and improved affordability 10

11 Irish Government finances Irish public finances have deteriorated sharply but from a very healthy starting point Government projects deficits of 10.75% of GDP in 2009 and Measures taken to reduce the fiscal imbalance - adjustment of 5% of GDP delivered through tax increases and spending cuts Government plans to eliminate the Current budget deficit and reduce General Government deficit to 3% of GDP by 2013 NTMA demonstrated an ability to raise debt in difficult markets Fiscal deterioration not unique to Ireland 11

12 Path to recovery Exports are key to economic recovery Merchandise exports dominated by chemicals, pharma and medical devices and are performing well Strong relationship between US & Irish economies Ireland is well placed to benefit from a recovery in the US economy ECB easing and negative inflation Should relieve some pressure on household incomes and improve economic activity Government taking steps to stabilise fiscal position Plans to eliminate Current budget deficit and reduce General Government deficit to 3% of GDP by 2013 Plans to spend c.5% of GNP on capital projects supportive in lieu of fiscal stimulus Government supporting banking sector Government Guarantee for covered liabilities, recapitalisation of key banks and NAMA Ireland a small, open and flexible economy Labour market flexibility helping to enhance competitiveness Low corporate tax rate and pro-enterprise policies important in attracting FDI 12

13 Contents 1. Bank of Ireland overview 2. Irish economy & Government finances 3. Liquidity, funding & capital strategy 4. Group loan book & asset quality 5. Conclusion 6. Appendices i. Group financial highlights March 2009 ii. Additional Group loan book analysis iii. Contacts 13

14 Balance sheet funding Mar 09 Total liabilities 184bn* 45% Customer deposits 40% Wholesale funding 15% Capital, Sub debt/other Mar 08 Total liabilities 185bn* 47% Customer deposits 41% Wholesale funding 12% Capital, Sub debt/other Balance sheet funding Growth in assets subject to Increase in customer deposits Availability and quality of wholesale funding Maintenance of prudent liquidity buffers Maintaining and building robust contingent liquidity pool Challenging funding markets Volatile markets - collapse of Lehmans in Sept 2008 Irish Government Guarantee for deposits and certain liabilities introduced in Sept 2008 Prioritising gathering of customer deposits. Higher than usual deposit inflows in quarter to Dec 08 these inflows unwound in Jan / Feb 09 following rating agency actions and nationalisation of Anglo Irish Bank. Deposit levels stabilised in late Feb / early Mar 09 Wholesale funding 74bn March 2009; 75bn March 2008 Enhancing contingent liquidity position eligible collateral pool of 49bn at March 2009 * Excludes Life funds held on behalf of policyholders: Mar bn, Mar bn 14

15 Group deposits Divisional profile of deposits (constant currency at Mar 08 exchange rates) Mar 09 Mar 08 Group total 86bn 86bn flat Retail Ireland - Deposits - Credit Balances 33.4bn 23.0bn 10.4bn 33.0bn 21.0bn 12.0bn yoy % growth 1% Capital Markets 28.2bn 32.1bn (12%) UK Financial Services (UKFS) - BBUK -POFS 24.1bn ( 19.2bn) 11.0bn 7.8bn 21.1bn ( 16.7bn) 12.8bn 3.3bn 15% 10% (13%) (14%) 136% Competitive and price-sensitive deposit markets Deposits at March 2009 in line with March 2008 (constant currency) Gaining market share in Irish resources - 27% of total market for deposits/credit balances extensive distribution capability with leading and trusted franchise Retail Ireland resources growth of 1% Deposits increased 10% driven by distribution and trusted franchise; current account credit balances decreased 13% due to lower pace of economic activity UKFS deposit growth of 15% Strong deposit growth of 136% to 7.8bn in UK Post Office Financial Services - extensive distribution and franchise key growth drivers UK Business Banking down 14% to 11bn Capital Markets down 12% to 28.2bn 15

16 Wholesale funding profile Total 74bn as at 31 Mar 09 9% / 6bn 34% / 25bn 18% / 14bn Securitisation Senior debt / ACS CP/CDs 39% / 29bn Deposits by 19% / Banks 14bn Maturity profile Total 75bn as at 31 Mar 08 11% / 8bn 34% / 26bn 36% / 27bn Mar 09 Mar 08 <1yr 73% 67% 1-3yrs 16% 16% 3-5yrs 7% 10% 5-7yrs 3% 3% >7yrs 1% 4% Wholesale funding decreased from 75bn at March 2008 to 74bn at March % of wholesale funding has a maturity greater than one year at March bn term funding raised during the year to March 09 weighted average duration 1.7 years, cost of 3mth euribor + circa 66bps Public benchmark deals: a) In June 2008, issued 1.25bn senior unsecured 2 year FRN at a cost of 3mth euribor + 105bps b) In November 2008, issued 2bn senior unsecured 21mth Government Guaranteed transaction at mid swaps + 65bps c) In April 2009, issued a further 1bn tap of b) above at a cost of mid swaps + 185bps 16

17 Strong contingent liquidity position Bank of Ireland has developed significant pools of eligible collateral from its balance sheet, which provide access to secured funding during periods of market stress At March 2009, the Group had a contingent liquidity pool of 49bn The Group benefits from its ability to access the ECB, Bank of England and US Federal Reserve Key contingent liquidity strategic initiatives Assets Active contingent liability strategies Mortgage backed promissory note Irish Residential Mortgage book UK Residential Mortgage book Corporate Loan book Bank of Ireland Mortgage Bank ACS Internal securitisation of Irish Mortgage book; Pirus Internal securitisations of UK Mortgage book; Colston 1, 2, 3 & 4 UK Covered Bond Programme Internal CLO securitisation Internal CMBS securitisations 17

18 Funding position Funding metrics Mar 09 Sept 08 Mar 08 Loan to deposit ratio 161% 159% 157% Customer deposits as % of total assets* 45% 47% 47% Wholesale funding as % of total assets* 40% 41% 41% % customer loans funded by customer deposits and term funding (funding with remaining maturity >1year) Term funding > 1 year, subordinated debt and customer deposits / loans and advances to customers 77% 79% 82% 83% 84% 87% *Note: Total assets excluding BoI Life policyholder assets 18

19 Irish Government Guarantee Scheme Credit Institutions (Financial Support) Scheme 2008 Key terms & impact of Guarantee 1. Explicit 2. Automatic 3. Irrevocable 4. Unconditional 5. Timely payment 6. Zero % risk weighting 7. Guaranteed debt benefits from full Irish Sovereign credit rating (maturing within the guarantee period) Government to extend Guarantee On 7 th April, the Irish Minister for Finance confirmed the extension of the Government Guarantee for the future issuance of debt securities with a maturity of up to five years from covered Irish banks. Bank of Ireland instruments covered All deposits (retail, commercial, institutional, interbank) Asset Covered Securities (ACS) Senior unsecured debt Dated subordinated debt (lower Tier 2) All existing and new debt, in all currencies is guaranteed to 29 September 2010 or their maturity, whichever is earlier Branches in Ireland, UK, France, Germany and the US Subsidiaries: Bank of Ireland Mortgage Bank ICS Building Society and Bank of Ireland (IOM) Ltd Further information Information on the Government Guarantee Scheme may be found at 19

20 Capital position Strengthening capital position Government supported recapitalisation investment of 3.5bn in 8% coupon preference stock and warrants over 25% of enlarged ordinary stock Balance sheet de-leverage - ceased intermediary-driven UK mortgage distribution and exiting non-core international lending niches (Jan 09) Issued 450m lower tier 2 capital in August 2008 and redeemed 600m lower tier 2 capital in December 2008 Cancelled dividend on ordinary stock Actively managed risk-weighted assets Capital Basel II Mar 09 Mar 08 % bn % bn Equity tier 1 6.2% % 6.6 Core tier 1 capital Tier 1 capital 9.5% % % % 9.4 Total capital 15.2% % 13.0 RWA

21 Contents 1. Bank of Ireland overview 2. Irish economy & Government finances 3. Liquidity, funding & capital strategy 4. Group loan book & asset quality 5. Conclusion 6. Appendices i. Group financial highlights March 2009 ii. Additional Group loan book analysis iii. Contacts 21

22 Profile of loans & advances to customers - 136bn at March 2009 Group loan book Residential mortgages - 44%/ 59bn SME/corporate - 27%/ 37bn Property & construction - 25%/ 34bn Consumer 4%/ 6bn RoI - 21% UK 23% RoI - 12% UK 8% RoW 7% RoI - 11% UK 13% RoW 1% RoI 3% UK 1% Group loan book 136bn (before provisions 1.8bn) at 31 March 2009 Significant residential mortgage book - 44% of the loan portfolio, 21% in Ireland and 23% in the UK Lending to SME/corporate sectors is 27% of the loan portfolio - 12% in Ireland, 8% in the UK and 7% in RoW 25% of loan book in Property & construction lending - 11% in Ireland, 13% in the UK (NI & GB) and 1% RoW 4% of loan book is consumer lending which includes credit cards, personal loans and motors loans - 3% in Ireland and 1% in the UK Sector profile of book broadly the same as September 2008 & March

23 Group loan book grade profile Mar 09 ( 136bn)* High quality 53.5% Satisfactory 27.3% Acceptable 9.3% Lower quality but not past due/ impaired 1.7% Past due but not impaired** 4.3% Impaired*** 3.9% Mar 08 ( 136bn)* High quality 57.2% Satisfactory 34.5% Acceptable 4.8% Lower quality but not past due/ impaired 0.5% Past due but not impaired** 2.2% Impaired*** 0.8% Quantum of challenged loans were 15.7 billion at 31 March 2009 compared to 4.1 billion at 31 March 2008 Challenged loans include impaired loans, together with elements of past due but not impaired loans, lower quality but not past due / impaired loans, and loans at the lower end of acceptable quality which are subject to increased credit scrutiny Year on year change of 11.6 billion is due to an increase of 4.3 billion in impaired loans with the balance attributable to the impact of general economic conditions on arrears and downward grade migration across the portfolio * Note: Pre balance sheet provisions (Mar 09: 1.8bn; Sept 08: 0.8bn; Mar 08: 0.6bn) ** Note: Past due but not impaired defined as loans where repayment of interest and/or principal are overdue by at least one day but on which the Group does not expect to incur a loss. *** Note: Impaired loans: loans with a specific impairment provision attaching to them together with loans (excluding residential mortgages) which are more than 90 days in arrears 23

24 Stock of balance sheet provisions and impairment charge loans and advances to customers Group Retail Ireland Capital Markets UK Financial Services Mar 09 Mar 08 Mar 09 Mar 08 Mar 09 Mar 08 Mar 09 Mar 08 Total loans and advances to customers (point in time) ( bn) Impaired loans ( m) Stock of balance sheet provisions ( m) Stock of balance sheet provisions / total impaired loans (%) Impairment charge ( m) (12-months) Impairment charge (bps)

25 Impairment by portfolio Mar bps Residential mortgages 20bps Ireland - 23bps UK - 20bps Mar 08 17bps Residential mortgages 1bp Ireland 1bp UK - 1bp Total loans and advances to customers - 136bn at 31 March 2009; 136bn at 31 March 2008 Group impairment charge on loans and advances to customers year ended 31 March ,435m or 102bps; year ended 31 March m or 17bps SME/corporate - 94bps SME/corporate 25bps Residential Mortgages -Republic of Ireland -UK Mar 09 Mar m 61m 64m/ 58m 5m 2m 3m/ 2m Property & construction 211bps of which Investment - 61bps Development/landbank 493bps Property & construction 17bps of which Investment - 5bps Development/landbank 37bps SME/Corp 344m 83m Property & Construction Investment Development/Landbank 766m 143m 634m 60m Consumer 198m 79m 11m 49m Consumer - 308bps Consumer - 110bps Total 1435m 227m 25

26 UK Residential mortgages 29bn/ 31bn March 2009 UK mortgages 52% of total Group mortgages (23% of Group loans and Book - segment split 47% Standard advances to customers) Book growth slowing - withdrawal from intermediary sourced mortgage business (Jan 09) - strategic decision to de-leverage Group balance sheet Mar 09 vs Mar 08: 7% Mar 09 vs Dec 08: 0% (annualised) Mar 09 vs Sept 08: 1% (annualised) Sept 08 vs Mar 08: 13% (annualised) House prices fell 15.7% yoy to March 2009; down 18.9% since peak in October 2007 (Nationwide) Asset quality: Arrears greater than 3 months in arrears Mar 09 Dec 08 Sept 08 Mar 08 Book - BoI 148bps 118bps 75bps 63bps CML 239bps 188bps 142bps 118bps 35% BTL Buy to let - BoI 173bps 140bps 80bps 57bps CML 309bps 231bps 156bps 92bps Self Cert - BoI 366bps 263bps 164bps 139bps Standard- BoI 80bps 66bps 50bps 49bps 18% Self-cert Impairment charge 20bps March 2009 (6bps annualised Sept 08; 1bp Mar 08) Repossessions Bank of Ireland has 267,000 mortgages in the UK At Mar properties or 0.15% of the portfolio in possession 619 new repossessions in full year to 31 Mar new repossessions in Quarter to 31 Mar 09 (62 in Apr 09) 26

27 Irish Residential Mortgages 28bn March 2009 Book - segment split 28% FTB 28% BTL 23% 21% Trading up/down Equity release & switchers Irish mortgages 48% of total Group mortgages (21% of total Group loans and advances to customers) Book growth in line with the market: Mar 09 vs Mar 08: 5% Mar 09 vs Dec 08: 1% (annualised) Mar 09 vs Sept 08: 4% (annualised) Sept 08 vs Mar 08: 6% (annualised) New business product split: full year to Mar 09: 24% FTB; 24% Trade-up/down; 24% BTL: 28% Equity release/switchers full year to Mar 08: 24% FTB; 24% Trade-up/down; 29% BTL: 23% Equity release/switchers House prices fell 10% yoy to March 2009; down 18% to date from peak in February 2007 (PTSB) - official statistics trailing actual market Negative equity 12,200 mortgages in negative equity representing 3.4bn total mortgage loans quantum of net negative equity 355m Circa 900m FTB 100% mortgages, representing 3,200 mortgages c. 174m negative equity Asset quality Arrears 90 days or more past due: Book: 192bps Mar 09 (91bps Sept 08; 70bps Mar 08) Impairment charge: 23bps Mar 09 (2bps annualised Sept 08; 1bp Mar 08) Repossessions: Bank of Ireland has 195,700 mortgage accounts in Ireland At Mar 09 6 properties in possession 5 new repossessions in the full year to 31 Mar 09 (voluntary) 27

28 Property & construction lending 34bn March 2009 Geographic and sector profile* Ireland Investment Development Landbank Total Landbank % 10% Residential 4% 7% - 11% Commercial 21% 3% - 24% Total Ireland 25% 10% 10% 45% UK (GB/NI) Landbank - - 5% 5% Residential 5% 7% - 12% Commercial 30% 3% - 33% Total UK (GB/NI) 35% 10% 5% 50% Total other 5% - - 5% TOTAL 65% 20% 15% 100% Overall portfolio March 2009 Property & construction lending of 34bn 25% of the Group loan book at 31 March 2009 Bias towards investment lending 22bn or 65% of portfolio impairment increased with pressure emerging in retail and office properties Development and landbank portfolio 12bn or 35% of portfolio portfolio more negatively impacted by property asset repricing with rising impairment in landbank and residential development portfolios in particular * Note: Slide 50 provides geographic and sector profile of property & construction lending in amounts 28

29 Property & construction Investment lending 22bn March % of total property & construction lending of 34bn Property & construction investment lending - Geographic and sector profile Investment portfolio Investment Investment lending 22bn 65% of property & construction loans Ireland Geographic profile Landbank - Residential 6% Commercial 33% Total Ireland 39% UK (GB/NI) Landbank - Residential 8% Commercial 46% Total UK (GB/NI) 54% Total Other 7% TOTAL 100% 39% in Ireland, 54% in the UK and 7% US/Europe Impairment charge of 61bps at 31 March 2009 pressure emerging in retail and office portfolios Key risks rising office vacancy levels and lower retail sales Commercial investment Ireland 7.2bn - Portfolio well diversified good quality tenants & spread of properties - c.45% retail; 30% office; 11% industrial; 14% other Commercial investment UK 10.1bn & RoW 1.5bn - Portfolio well diversified good quality tenants - c.66% retail, 16% office, 4% industrial, 14% other Residential investment 2.9bn (UK 1.7bn & Irl 1.2bn) - Concentration in SME lending, housing associations and student accommodation - mainly houses rather than apartments - Properties well spread with good tenant profile 29

30 Property & construction Development and landbank 12bn March % of total property & construction lending of 34bn Development and landbank lending - Geographic and sector profile Development and landbank portfolio Ireland Development Landbank Total Landbank - 29% 29% Residential 18% - 18% Commercial 9% - 9% Total Ireland UK (GB/NI) 27% 29% 56% Landbank - 15% 15% Residential 19% - 19% Commercial 8% - 8% Total UK (GB/NI) 27% 15% 42% Total Other 2% - 2% TOTAL 56% 44% 100% Development and landbank lending 12bn 35% of property & construction loans Impairment charge of 493bps year ended 31 March 2009 Profile of development and landbank portfolio - 56% in Ireland, 42% in the UK and 2% US/Europe - 56% in development and 44% in landbank Commercial development 2.1bn (Irl 1.1bn/UK 1bn) - Risk significantly mitigated through pre-sales/pre-lets Landbank 5.3bn (Irl 3.6bn and UK 1.7bn) Exposures largely cross-collateralised but subject to severe stress in poorer economic climate Residential development 4.6bn (Irl 2.2bn/UK 2.4bn) - Most sensitive to house price declines - Limited exposure to partly completed stock 30

31 Asset quality across other lending portfolios March 2009 SME/corporate lending portfolio of 37bn SME/ corporate lending 37bn - 43% Ireland, 30% UK and 27% RoW SME portfolio in UK and Ireland although well diversified across a range of sectors is impacted by general downturn in levels of economic activity Corporate lending senior debt lender focusing on a range of specialist portfolios mid-market leveraged acquisition finance, global project finance, corporate Ireland, and specialist niche lending including media, maritime, asset backed lending Impairment charge 94bps in year to 31 March 2009 loss trends within expected ranges for current point in recessionary cycle will trend upwards Consumer lending unsecured 6bn 4% of loans and advances to customers 6bn Includes personal loans, overdrafts, motor loans and credit cards Significant deterioration in asset quality from 110bps in March 2008 to 308bps to March 2009 Tightening credit criteria and enhanced management of arrears 31

32 Outlook for asset quality In February we indicated an expected loan impairment charge of c. 4.5 billion in the 3 year period to March 2011, indicating that if key economic indicators deteriorated there was downside risk to this estimate of up to an additional 1.5 billion Given the change to consensus economic forecasts, particularly in Ireland, we believe the more likely outcome is now circa 6 billion in the 3 year period to March 2011 Downside risk to this estimate arises in the event of even further deterioration in economic conditions or further prolonged low levels of activity in residential and commercial property markets Economic assumptions (circa 6bn loan losses) Ireland House price falls peak to trough 45% Average Unemployment % % GDP growth not expected before 2011 United Kingdom House prices falls peak to trough 35% Average Unemployment % % GDP low growth not expected before

33 Contents 1. Bank of Ireland overview 2. Irish economy & Government finances 3. Liquidity, funding & capital strategy 4. Group loan book & asset quality 5. Conclusion 6. Appendices i. Group financial highlights March 2009 ii. Additional Group loan book analysis iii. Contacts 33

34 Conclusion Irish economy and Irish Government face challenges Irish Government taken steps to reduce fiscal imbalance Commitment by Irish Government to support banking sector Bank of Ireland; fundamentally sound and responsible issuer Focus on actively and prudently managing credit risk Diverse funding position continues to support the Group Prioritising gathering of deposits, maintaining access to wholesale funding markets and strengthening contingent liquidity position Strengthened capital position 34

35 Contents 1. Bank of Ireland overview 2. Irish economy & Government finances 3. Liquidity, funding & capital strategy 4. Group loan book & asset quality 5. Conclusion 6. Appendices i. Group financial highlights March 2009 ii. Additional Group loan book analysis iii. Contacts 35

36 (Loss)/profit before tax by Division (Loss)/profit before tax by Division Mar 09 m Mar 08 m % Change Retail Ireland (97) Bank of Ireland Life (31) 108 (129) Capital Markets (27) UKFS (euro equivalent) (92) UKFS (Stg ) ( 10m) ( 330m) (97) Group Centre (166) (144) (15) Underlying Profit before tax (81) Non-core items (339) (Loss)/profit before tax (7)

37 Retail Ireland Retail Income Statement Mar 09 m Mar 08 m Net interest income Other income % Change Total income (6) Operating expenses (931) (983) (5) Operating profit before impairment charge (8) Impairment charge (708) (146) Share of Associates and Joint Ventures (70) (1) Profit before tax (97) Adverse impact of rapid and severe contraction in Irish economy, property market downturn, stock market weakness & higher funding costs *Net interest income 1% tighter liability spreads, higher funding costs, modest volume growth Lending flat yoy with mortgages 5%; business lending 1%; consumer lending 7% Customer accounts 1% with deposits 10%; credit balances 13% *Other income 24% impairment of investment properties held for re-sale, reduced insurance sales and higher claims, lower levels of fee-generating sales activity, Costs 5% staff numbers reduced significantly ( 6%) Impairment charge 129bps March 2009 (28bps Mar 08) Mortgages 23 bps Mar 09 (1 bps Mar 08) Business Banking 210bps Mar 09 (33bps Mar 08) Consumer lending 416bps Mar 09 (195bps Mar 08) Share of Associates and Joint Ventures ( 70m) relating principally to a negative mark to market of an investment in a property unit trust *Note: Commentary on performance quoted after impact of IFRS income classification between net interest income & other income 37

38 Bank of Ireland Life BoI Life Income Statement Mar 09 m Mar 08 m % Change Operating income (23) Operating expenses (108) (110) (1) Operating profit (38) Investment valuation variance Discount & other rate changes (Loss)/profit before tax* (117) (50) (16) (6) (31) 108 (129) Significant reduction in operating profit and profit before tax Income impacted by continued volatility in equity markets Lower volumes of new business APE sales 44% to March 2009 Regular Premium sales ( 36%) Single Premium sales ( 53%) Lower funds under management Higher policy lapses Rigorous cost control Negative investment valuation variance increase from ( 50m) to ( 117m) Discount rate increased from 8% to 9% in line with long term bond yields * Underlying Loss before tax 38

39 Capital Markets PBT Business Analysis Mar 09 m Strong operating profit pre-impairment 23% Income 11%: strong performance in Corporate Banking & Global Markets Costs 10%: lower variable compensation, scale-back in international activities & tight control of spend Lending 10%; deposits 10% Deteriorating asset quality Mar 08 m Impairment charge on loans & advances to customers 305m/108bps (Mar 08: 48m/19bps) Impairment charge on AFS / Other 78m (Mar 08: 5m) Capital Markets profit before tax 27% % Change Corporate Banking (34) Global Markets Asset Management (14) 66 Division Centre (5) (11) Profit before tax* (27) * Underlying PBT Operating profit 40% Corporate Banking Operating profit before impairment 32% Income 23% strong growth in lending and higher margins. Lending 10% pace of growth slowing Good cost control costs 7% Impairment charge of 305m / 108bps (Mar 08: 48m / 19bps) Over 60% of the increased charge relates to property and construction Global Markets strong income performance in volatile markets growth in third party customer business & good positioning in falling interest rate environment PBT 11% Impairment charge of 63m primarily Washington Mutual and Icelandic Banks Asset Management Loss due to: lower assets under management weak equity markets & some international mandate losses Lehmans collapse 32m negative impact 39

40 UK Financial Services (Sterling) PBT Business Analysis Mar 09 m Mar 08* m % Change Business Banking (81) 181 (145) Mortgage Business (30) Consumer Financial Services Division Centre (49) (29) Profit before tax** (97) Business Banking Operating profit 6% - strong cost management Loss before tax of 81m Impairment charge of 292m March 2009 vs 18m March % of impairment charge in landbank & residential development portfolio Mortgages PBT 30% driven by reduced early redemption income, higher loan losses and increased funding costs partly offset by enhanced new lending margins Slowing volume growth ceased broker mortgage distribution in January 2009 Impairment charge of 58m/20bps (Mar 08: 2m/1bp) Consumer Financial Services *Note: Divisional PBT performance of UK Financial Services (UKFS) and Group Centre are restated to reflect the corporate restructuring of Bristol & West plc undertaken to obtain the optimum capital and funding treatment for the Group under Basel II. For the 12 months ended 31 March 2008, this restatement reduces the UKFS PBT to 330 million from 353 million and it reduces Group Centre s loss by an equivalent amount. **Underlying PBT POFS strong growth in savings & insurance products 2 million customers; deposits 136% to 7.8bn FRES challenging year, impact of recession & sterling weakness on travel & demand for currency 40

41 Loan & deposit volume growth Volume growth* Mar 09 vs Mar 08 Retail Financial Services Ireland Capital Markets UKFS Sterling Group Deposits 15% Corporate Loans Business Loans Mortgage Loans +15% Loans 10% 5% Mortgage Loans Business Loans Deposits & Credit Balances +7% +8% +5% Deposits 0% -5% +5% +1% -7% +1% +10% -10% Loans +7% -1% Loans - 4% Deposits Flat Constant Currency -10% Loans flat Consumer loans Customer Deposits *Point-in-time volume growth 41

42 Net interest margin Net interest margin Mar 09 Mar 08 Net interest income (after impact of IFRS income classifications) 3092m 2917m Average interest earning assets 177bn 175bn Net interest margin 1.74% 1.66% Margin improvement - drivers Mar 09 vs Mar 08 (bps) Balance sheet structure/asset mix +6 Lending margins +8 bps Margin movement Mar 04 Mar 05 Mar 06 Mar 07 Mar 08 Mar bps -20 bps -21 bps -4 bps -3 bps 8 bps Improved treasury margin +5 Higher funding costs associated with market dislocation Liability spreads -7 Net interest margin improvement -4 +8bps 42

43 Contents 1. Bank of Ireland overview 2. Irish economy & Government finances 3. Liquidity, funding & capital strategy 4. Group loan book & asset quality 5. Conclusion 6. Appendices i. Group financial highlights March 2009 ii. Additional Group loan book analysis iii. Contacts 43

44 Residential Mortgages Ireland Average Loan to Value new business Retail Ireland Mar 09 Mar 08 Mar 07 Owner Occupied 63% 70% 74% Investors 57% 59% 63% Mortgages arrears profiles Retail Ireland 1-3 mths 3-6 mths 6-12 mths 12+ mths Total Mar 09 (%) Sept 08 (%) Mar 08 (%) Based on values 44

45 Residential Mortgages - UK Average Loan to Value new business UK Mar 09 Mar 08 Mar 07 Standard 60% 66% 57% Specialist Buy-to-let 70% 71% 72% Self-certified 66% 75% 75% Mortgages arrears profiles UK 1-3 mths 3-6 mths 6-12 mths 12+ mths Total Mar 09 (%) Sept 08 (%) Mar 08 (%) Based on no. of cases 45

46 Profile of Available for Sale Financial Assets bn March 2009 Profile of AFS Assets Portfolio of Available-for-sale (AFS) financial assets: 26.9bn (Mar 08: 29.3bn) Liquid asset portfolio at 31 March 2009: 25.2bn (Mar bn) Average life of liquid asset portfolio to maturity 2.57 years ABS portfolio at 31 March 2009: 1.7bn (Mar bn) Closing negative AFS reserve balance of 1,532m (Mar 08: 419m) m movement in the full year to March 2009; 76m impairment through Income Statement in the full year to 31 March bn government bonds (Mar bn) Government securities >95% AAA rated Closing positive AFS reserve balance of 67m (Mar 2008: negative 3m) - 70m positive movement in the year to March 2009 Mark-to-market on portfolio 102.2% 17.8bn senior bank debt; 4.8bn Covered bonds; and 0.1bn other Covered bonds/ Senior bank debt ABS portfolio Average rating AA- Closing negative AFS reserve balance of 1046m (Mar 08: negative 278m) - 768m movement in the full year to March 2009 Mark-to-market on portfolio 96.6% Impairment charge 61m on Senior bank debt (WaMu & Icelandic Banks) through Income Statement in the full year to March bn ABS portfolio (Mar bn) Closing negative AFS reserve balance of 559m (Mar 08: negative 138m) - 421m movement in the year to March 2009 Mark-to-market on portfolio 80.9% 14m impairment in current year - 21m cumulative impairment to March

47 Property & construction lending March 2009 ( 34bn) Geographic and sector profile Investment - bn Development - bn Landbank - bn Total - bn Ireland Landbank Residential Commercial Total Ireland UK (GB/NI) Landbank Residential Commercial Total UK (GB/NI) Total Other TOTAL

48 Contents 1. Bank of Ireland overview 2. Irish economy & Government finances 3. Liquidity, funding & capital strategy 4. Group loan book & asset quality 5. Conclusion 6. Appendices i. Group financial highlights March 2009 ii. Irish & UK mortgage book analysis iii. Contacts 48

49 Contacts For further information please call: Group Treasurer Sean Crowe tel: sean.crowe@boimail.com Wholesale Liabilities Paul Flynn tel: paul.flynn@boigm.com John Barry john.barry@boigm.com Darach O Leary darach.oleary@boigm.com Capital Management Brian Kealy tel: brian.kealy@boimail.com Colin Reddy tel: colin.reddy@boimail.com Financial Institutions Monty Mackenzie tel: monty.mackenzie@boigm.com Debt Investor Relations Maria Casey tel: maria.casey@boigm.com Investor Relations website 49